NEW YORK (MainStreet) – Ten of the nation’s largest banks will be formally sanctioned for foreclosure abuses, the Federal Reserve announced Wednesday.
Citing “a pattern of misconduct and negligence” in foreclosure proceedings, the Fed asked the banks to institute new foreclosure practices that “treat customers fairly, are fully compliant with all applicable law, and are safe and sound.” It also announced formal sanctions of the banks, and while it did not say how large the fines would be, it did say that “monetary sanctions in these cases are appropriate” and would be announced at a later date.
The 10 banks sanctioned Wednesday, including Bank of America (Stock Quote: BAC) and Citigroup (Stock Quote: C), have all been involved in improper foreclosure procedures, including “robo-signing,” when lenders signed off on foreclosures without fully analyzing the paperwork.
The targeted banks comprise a full 65% of the loan servicing industry, handling nearly $7 trillion worth of mortgage balances, according to the Fed’s statement. The sanctions and calls for reform come after numerous reports of foreclosure abuses prompted regulators to conduct a thorough review of the practices of lenders and loan servicers.
Under new rules outlined by the Fed, loan servicers will be required to provide borrowers with a contact person during foreclosure proceedings, and will be required to discontinue proceedings if a borrower has successfully undertaken modification of the loan. It will also strengthen consumers’ rights to receive remediation if they are found to have suffered financial loss as a result of improper foreclosure proceedings.